External financing is needed for a variety of different purposes, but there are some common reasons why businesses apply for funding. This can include loans for working capital, to buy machinery, to hire more staff, or even re-finance existing loans to reduce monthly costs. Business owners use external financing to avoid making personal investments. Small businesses may also turn to external financing because they do not have enough working capital. Financing allows business owners to retain their company's capital and use outside debt on investments to purchase necessary business assets.